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Abstract

In this note estimates are presented of the Linear Expenditure System (LES), the Extended Linear Expenditure System (ELES) and the Extended Linear Expenditure System with Durables (DELES), under each of two alternative error specifications. Seasonally adjusted, quarterly Australian data for the period 1959(4) - 1976(2) are used. The main purpose is to gauge the contribution of DELES to the family of linear expenditure systems. Three practical matters are emphasized: (i) sensitivity to error specification; (ii) the role of a priori fixed decay rates in achieving numerical convergence in estimation; and (iii) numerical identification of the subjective time-preference and market interest rate parameters. The last of these turns out to be most important in determining the limiting properties of the model and in appraising the practical viability of DELES vis-a-vis the other two members of the LES family.

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